In AWS cloud contracts (as in life), read before signing

Lawyers say never to sign (or click on) anything without reading it first, but that rule typically goes out the window when it comes to complex-yet-boring end user licensing agreements (EULAs) and other software licenses.

As John Oliver said in his epic net neutrality screed: “If you want to do something evil, put it inside something boring. Apple could put the entire text of Mein Kampf inside the iTunes user agreement and you’d just go: Agree. Agree. Agree.”

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That read-before-clicking mantra holds true for license agreements from cloud providers as well. For example, I would bet that when many startups — which often don’t have legal departments — sign on for Amazon Web Services, they don’t check out all the verbiage fully. And they should.

In particular, there is a provision in the AWS customer agreement that they really should scrutinize. The contract’s Section 8.5 on license restrictions includes the usual restrictions that customers or their end users cannot modify, tamper with, reverse-engineer or create derivative works of the AWS service offerings, or use them in a way to avoid paying for them. Nothing too unusual there.

But here is where things get interesting (emphasis mine):

All licenses granted to you in this Agreement are conditional on your continued compliance this Agreement, and will immediately and automatically terminate if you do not comply with any term or condition of this Agreement. During and after the Term, you will not assert, nor will you authorize, assist, or encourage any third party to assert, against us or any of our affiliates, customers, vendors, business partners, or licensors, any patent infringement or other intellectual property infringement claim regarding any Service Offerings you have used.

Why so strict?

Basically, AWS is invoking its rights not to be sued for patent infringement by its customers not only for the time you’re using its service, but going forward — in theory — in perpetuity.

I talked to three attorneys specializing in intellectual property issues on this point. None of them work for [company]Amazon[/company] or its direct cloud competitors [company]Microsoft[/company] or Google, but none of them would speak for attribution. They all noted that it is unusual to enforce terms beyond the life of the customer relationship.

First, neither the Microsoft Azure license nor Google Cloud contracts include similar limitations, the lawyers said. The overall “broad covenant not to sue” is not unusual in and of itself, said a Seattle-based attorney, but the extensions of limitations beyond the term of contract was striking.

“So once a user agrees to these terms, they can never assert a patent or other IP infringement claim against Amazon or any other customer or user of AWS, against an AWS Service offering,” the attorney said via email. “This is even true if Amazon first sues the user for patent infringement on anything else.” Hmmm.

That, he said is an “onerous provision” out of step with the usual current terms of use, although such wording was more common in software licenses ten years ago. The AWS contract has not changed in nine years.

A Boston-based IP attorney concurred that this provision was not something he’s seen in other software contracts, but added that he wouldn’t be surprised if other web service vendors start including similar provisions.

“This strikes me as quite a bit more vendor-protective than the norm,” he said via email. “Is it overreaching? Probably, but I’d guess that few AWS customers have significant patents that they would intend to use in AWS-related suits against Amazon.”

A lawyer for a tech company that sometimes competes with AWS (and with Google and Microsoft) had a different take: In his view, startups typically don’t have much other than IP and so must protect it at all costs. “What AWS is saying is that not only can you not assert against us, but you can’t assert against our suppliers or partners. That is a big deal.”

Clause 8.5 is spelled out pretty clearly, and it’s been discussed publicly before: John Delaney, a partner at New York law firm Morrison Foerster, warned prospective AWS customers three years ago to look before they leap when it comes to signing AWS licenses. Still, none of the AWS customers I talked to recently for this story were aware of this provision.

Word to the wise: If you’re unsure, get a lawyer

Amazon Web Services declined to comment on its licensing terms for this story. But the company often negotiates enterprise agreements with large customers — the sorts of customers that do have general counsels and legal departments. I would be willing to bet that those customers insist that term be waived. And if a startup happens to have big-name VC backing, that might help finalize the deal.

Lydia Leong, [company]Gartner[/company] cloud analyst, said the notions expressed in the AWS contract are, for the most part, fairly common and unobjectionable, although she recommended that customers and their lawyers work out the specific language of their deal, which Amazon is usually willing to do as long “as the common-sense intent is preserved.”

AWS would probably always insist that the user cannot reverse-engineer stuff, not pay for service, and the like; and none of that should surprise anyone. However, the no-patent-infringement-claims clause, she added, is more questionable. “Lawyers, especially those for technology-industry customers, may want to closely negotiate that language,” she said via email.

What’s interesting here is that, in theory, this 8.5 provision could allow Amazon to defend itself against customers (or former customers) if it ends up using their IP down the road. All the more reason to get the lawyers involved up front: after all, the patent system is not exactly the most well-run government program.

Great article, was there any attempt to get a comment from AWS.. I remember working with them in the early days when these types of verbiage are common in contacts of the day.. I wonder if AWS would make changes to the contract or this is a non negotiable item for them. That would be more telling. None the less really interesting data points for startups to consider

This is a great article. I work for a large Fortune 500 company. We are actually very familiar with this clause, and because of it, will not contract with Amazon for any services, due to concerns about losing our intellectual property. We have had a number of our corporate lawyers review this clause and all have come to the same conclusion. Thank you for sharing this with others who may not be aware of this clause.